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Arizona legislators vote against exclusive app store payment systems

HB2005 would stop Apple from forcing its payment system on developers and users

The Arizona House of Representatives has passed a bill that would throttle Apple's ability to enforce its app store payment policies.

The legislation (HB2005) passed in a 31-29 vote in the Republican-controlled House as an amendment to Title 18 of the Arizona revised statutes. The amendment, which adds a seventh chapter to that section, is just three pages but significant for companies running app stores, like Apple or Google.

The law targets app store providers offering more than a million downloads and prevents them from requiring an Arizona-based developer to use an exclusive in-app payment system. The app store providers also can’t force Arizona-based users to use an exclusive payment system. The law also makes it illegal to retaliate against a developer or user based in the state for using an alternative payment system.

The document applies to "general purpose hardware," including tablets, smartphones, and PCs of any kind, which also brings Macs under its scope. The language of the clause seems to call this out, specifically including in its scope "A digital distribution platform that is provided or used for only certain types of devices, such as certain grades of computing device, devices that are made by only a particular manufacturer or devices that run a particular operating system.”

The case comes at a thorny time for Apple and Google, as game publisher Epic sued them last August over commission collection via their in-app payment systems. While Google has tried to distance its dispute with Epic from Apple's, citing its policy of permitting multiple app stores on its smartphones, Epic's battle with Apple is especially bitter.

Apple takes a 30% commission on sales through its app store. Last year, Epic promised a 20% discount for customers who bought its in-game currency directly rather than buying through Apple's ecosystem. Epic sued Apple after the smartphone manufacturer responded by removing its game from the app store.

Since then, other companies, including Spotify, ProtonMail, Basecamp, and Tinder owner Match Group, have formed an alliance called the Coalition for App Fairness that’s protesting Apple's terms and conditions. Epic has also filed an antitrust complaint against Apple in Europe.

The Coalition welcomed the move yesterday. "The Coalition for App Fairness is pleased to see the House passage of #HB2005, which will encourage business innovation in Arizona and protect consumer choice," it tweeted. "While this is cause for celebration, it is only a first step toward achieving a truly level playing field for all."

This is not the only state-level legislative action addressing terms and conditions in digital markets. In February, a similar bill in North Dakota failed to pass, and Minnesota announced a similar bill last month. 

The issue has also prompted scrutiny from government regulators. Today, the UK Competition and Markets Authority announced an investigation into Apple over suspected anti-competitive behavior.

HB2005 now goes to the state Senate for another vote.

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